Tribunal Overturns Appeal Dismissal, Grants Trust Income Exemption Under IT Act for Non-Compliance Reversal.

The Tribunal allowed the appeal by the appellant, a trust registered under section 12A, against the order of the CIT(A) which dismissed the appeal for non-compliance and upheld the addition of Rs. 31,84,320 by disallowing the exemption under section 11(2) of the Income Tax Act 1961. The Tribunal found that filing the audit report in Form No.10 during assessment proceedings constituted valid compliance, allowing the benefit of income accumulation under section 11(2). The AO was directed to verify and extend the claimed benefit, with the order pronounced on 07.11.2023.

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Issues Involved:
The appellant sought to set aside the order passed by the National Faceless Appeal Centre regarding the assessment year 2016-17 on grounds including dismissal of appeal for non-compliance, addition of income by disallowing exemption claimed, and denial of natural justice.

Dismissal of Appeal for Non-Compliance:
The Hon. CIT(A) dismissed the appeal ex-parte for alleged non-compliance to appeal and hearing notices, denying the appellant an opportunity to furnish explanations. The appellant contended that this breached principles of equity, fairplay, and natural justice. The order was challenged to be quashed or set aside.

Disallowance of Exemption Claimed:
The Hon. CIT(A) upheld the addition of Rs. 31,84,320 made by the AO by disallowing the exemption claimed under section 11(2) of the Income Tax Act 1961. This disallowance was based on the failure to furnish Form no.10 before the due date of filing the return of income under section 139(1) of the Act. The appellant argued that this action was unjustified and requested the benefit of exemption under section 11(2) to be granted.

Judgment Details:
The appellant, a trust registered under section 12A of the Act, filed its return of income but did not submit Form No.10 along with it, as required under section 139(1) of the Act. The AO assessed the income at Rs. 31,84,320, denying the benefit of accumulation of income under section 11(2) due to the late submission of Form No.10.

The matter was taken to the Ld. CIT(A), who confirmed the addition by dismissing the appeal for want of prosecution. The appellant then approached the Tribunal, arguing that the filing of the audit report in Form No.10 during the assessment proceedings should be considered sufficient compliance to extend the benefit of accumulation under section 11(2) of the Act.

The Tribunal referred to relevant legal precedents and determined that the filing of the audit report in Form No.10 during the assessment proceedings was a valid compliance under the Act. The benefit claimed by the assessee under section 11(2) based on the audit report was deemed admissible under the law. The AO was directed to extend the benefit claimed by the assessee under section 11(2) subject to verification.

As a result, the appeal filed by the assessee was allowed, and the order was pronounced in the open court on 07.11.2023.

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